The State Council of China recently released the Provisions on Implementation of the Anti-foreign Sanctions Law of the People's Republic of China (the “Implementation Provisions”), taking effect on 23 March 2025. The Implementation Provisions serve as more detailed regulations following the Anti-foreign Sanctions Law (the “AFSL”) which has effective as of 10 June 2021. They provide helpful clarification but partly increase the burden for enterprises conducting international business.
1. Expansion on definition of foreign sanction
The AFSL primarily focuses on actions by foreign countries that, in the view of the Chinese government, interfere in China's internal affairs, and has established China's legal framework to counteract such actions. Article 3 of the AFSL authorises competent authorities to impose countermeasures against those who “adopt discriminatory restrictive measures against Chinese citizens and organisations or interferes in China's internal affairs”. This means the core term of the AFSL to counteract is foreign “discriminatory restrictive measures” (“DRM”). Beyond DRM, Article 15 of the AFSL provides for a catch all clause, i.e. that PRC authorities are entitled to issue countermeasures under the AFSL “where it is required to take necessary countermeasures against any foreign state, organization or individual who commits, assists or supports acts endangering the sovereignty, security and development interests of China”, and that “the relevant provisions of the AFSL shall apply mutatis mutandis”.
The Implementation Provisions, however, directly incorporate any conduct that the Chinese government deems to threaten China's sovereignty, security, or development interests into Article 3’s scope of applicable conduct. This expansion may cover foreign countries' export controls, investment reviews, tariff measures, and other actions beyond mere political “interference in China's internal affairs”, and without a DRM being required. Besides, private enterprises might also be affected, since the Implementation Provisions expand the targets of countermeasures to directly include those who “commit, assist or support” any act endangering the sovereignty, security and development interests of China, instead of applying the AFSL only “mutatis mutandis”.
In addition, the Implementation Provisions reserve the power of China’s government to take countermeasures against the conduct of “promoting and implementing litigations by any foreign country, organisation or individual” which the Chinese government deems to “endanger the sovereignty, security and development interests of China”, regardless of where such litigations are brought.
Relevant subjects involved in such proceedings may face countermeasures, including:
• restriction from entering China;
• sealing up, detaining, or freezing of property (including intellectual property and other intangible assets) within China;
• prohibition or restriction on transactions and cooperation;
• compulsory property enforcement;
• other stricter countermeasures.
It is unclear if litigations initiated by private enterprises fall under such scope. The wording of the Implementation Provisions is rather broad in this respect and does not explicitly exclude them. So far, examples of such litigations discussed in articles published in China only include e.g. the governments of several US states suing the relevant Chinese state authorities and demanded huge compensation on the grounds of China's alleged hoarding of personal protective equipment during the pandemic, i.e. they show certain political background. However, there is still no clear guideline on the scope of litigations that are deemed to “endanger the sovereignty, security and development interests of China” and this term is therefore subject to further clarification in future regulations or interpretations. If the term remains undefined, legal uncertainty among the business community might continue.
2. Legal consequence of not executing China’s countermeasures
The AFSL provides the legal obligation for onshore organisations and individuals to execute China’s countermeasures which are taken to safeguard China’s interests against DRM imposed on Chinese citizens or organizations or interferes in China's internal affairs by foreign countries, and individuals and organizations that have directly or indirectly participated in the formulation, decision on or implementation of DRM. For example, if China's countermeasures prohibit or restrict the onshore organizations or individuals from conducting relevant transactions, cooperation or other activities with certain individuals and organizations that interfere in China's internal affairs, the onshore organizations and individuals shall execute such countermeasures. “Onshore organisations and individuals” can include foreign-invested enterprises (“FIEs”) established in China and foreigners appointed as their company organs.
Providing more clarity, the Implementation Provisions now set forth the following legal consequences for failure to comply with this obligation:
• order to make correction;
• prohibition or restriction from engaging in government procurement, bidding, or tendering;
• prohibition or restriction from participating in activities related to the import and export of goods and technologies, or international trade in services;
• prohibition or restriction on the receipt or provision of data or personal information from or to foreign countries;
• prohibition or restriction from leaving or staying in China.
3. New exemption mechanism
Along with the above legal consequences, the Implementation Provisions allow for special application for exemption to conduct relevant activities with organisations and individuals against whom countermeasures have been taken. Such application shall be submitted to the competent departments of State Council with facts and reasons. This exemption mechanism is newly introduced under the Implementation Provisions as the AFSL did not provide for any exemption option. The evidentiary requirements, review timelines, and substantive evaluation criteria of the exemption mechanism remain subject to further clarification.
4. Administrative measures for implementing, or assisting with implementing, DRM against Chinese citizens or entities
The AFSL entitles Chinese individuals or organisations the right to bring lawsuit to demand cessation of infringement and compensation for losses against any organisation or individual that “implement, or assist in implementing” the DRM taken by any foreign country against them. In addition to such civil outcomes provided under the AFSL, the Implementation Provisions provide administrative measures against organisations or individuals that implement or assist in implementation of DRM against Chinese citizens or organisations. The administrative measures include:
• Conducting interviews;
• ordering to make correction;
• other corresponding measures.
It is worth noting that, same as the corresponding civil liability for implementing, or assisting in implementing, DRM, the above administrative penalties not only apply to domestic entities and FIEs but also apply to foreign entities. In addition, “other corresponding measures” may empower the enforcement authorities with a greater degree of administrative discretion.
5. Assistance in anti-foreign sanction administrative enforcement
The Implementation Provisions further specify the competent authorities’ duties of enforcing countermeasures and grant corresponding authorities the power to conduct investigations and consultations prior to enforcing countermeasures. It might be more common for enterprises in China to receive requests from the competent departments of the State Council to conduct such investigations and consultations, particularly those involved in actions covered by the AFSL. To ensure compliance and mitigate legal risks, companies should prepare in advance.
6. Conclusion
The Implementation Provisions strengthen China's administrative authority to monitor compliance and enforcement of the AFSL, and signal China’s growing commitment to ensure protection of its interests. Enforcement tools are therefore in place. Actual enforcement may gain momentum in the wake of the US tariffs and sanctions and, probably to a lesser degree, measures taken by the EU and other countries. It would desirable that the State Council provides more restrictive clarity on certain rather broad terms in the Implementation Provisions. This applies in particular to the question whether mere civil litigation in foreign countries can trigger Chinese countermeasures. However, one should prepare for the situation that this uncertainty will remain. Domestic enterprises and FIEs operating in China, but also foreign enterprises and organisations will have to spend increased effort to balance these Chinese compliance standards against other duties and responsibilities in their global operations or activities, in particular those resulting from conflicting sanctions regimes of other countries or areas. General advice and one-fits-all approaches are not possible; each situation requires a case-by-case analysis.
